A truck can be purchased for $55,000. Annual O&M costs are expected to increase by $1,800 every year, with a 1st-year O&M cost of $4,000. (MARR = 26% and the planning horizon is 10 years) • The compressor salvage value for a given period t is calculated based on the following equation: Salvage value (t) = $30,000– $3,000 * t a) Find the Optimum Replacement Interval for this Equipment b) Find the Optimum Replacement Interval for this Equipment if the O&M costs are decreased to $1,700/yr. What is your conclusion? c) Find the Optimum Replacement Interval for this Equipment if the initial cost is reduced to $52,000. What is your conclusion? (independent of part b)
A truck can be purchased for $55,000. Annual O&M costs are expected to increase by $1,800 every year, with a 1st-year O&M cost of $4,000. (MARR = 26% and the planning horizon is 10 years) • The compressor salvage value for a given period t is calculated based on the following equation: Salvage value (t) = $30,000– $3,000 * t a) Find the Optimum Replacement Interval for this Equipment b) Find the Optimum Replacement Interval for this Equipment if the O&M costs are decreased to $1,700/yr. What is your conclusion? c) Find the Optimum Replacement Interval for this Equipment if the initial cost is reduced to $52,000. What is your conclusion? (independent of part b)
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 5P
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A truck can be purchased for $55,000. Annual O&M costs are expected to increase by $1,800 every year, with a 1st-year O&M cost of $4,000. (MARR = 26% and the planning horizon is 10 years)
• The compressor salvage value for a given period t is calculated based on the following equation:
Salvage value (t) = $30,000– $3,000 * t
a) Find the Optimum Replacement Interval for this Equipment
b) Find the Optimum Replacement Interval for this Equipment if the O&M costs are decreased to $1,700/yr. What is your conclusion?
c) Find the Optimum Replacement Interval for this Equipment if the initial cost is reduced to $52,000. What is your conclusion? (independent of part b)
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